Oceanside REO: Back to 2002 / 2003 Prices
Submitted by
CalculatedRisk on Mon, 06/30/2008 - 6:43am (57 comments)
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All, by the way, I spoke with another agent in San Diego this weekend - and she told me that she just looks up 2002 prices when she is going to list properties. Why bother with higher prices that will never sell?
In fact she told me listings are costing her money - she doesn't want them unless the sellers price aggressively.
Best to all.
Interesting. I just look up 2002 share prices on national homebuilders to see where they should end up soon, but that may be way too optimistic, even for the ones that survive.
Just curious, but are 2002 prices affordable to most buyers?
(The Main Reason NOT to vote for John McCain.)
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"Just curious, but are 2002 prices affordable to most buyers?"
No.
I live in San Diego, it was bubbly back then. Some downtown condos that sold for a quarter of a million in 2000, were going off for 400-500 thousand in 2002. To be sold again in 05-06 for close to a million dollars.
In affluent suburbs in MA, we've found the FSBO's are priced way above similar listed properties. I think the seller must be unhappy with the real estate peoples' proposed pricing. One property was listed at 20% below an identical FSBO on the same street. The FSBO owner recently had taken 20% off his price to get to the 20% higher number....40% away from reality at least.
to quote a real estate friend, 'you can't spend a listing'. Much better to have the buyer in this market, if you find one.
looking at the trend line and throwing out the bubble, pricing off 2002 comparables seems reasonable, not aggressive.
OT - Short term top in oil still valid.
HaloScan.com - Comments
From the vid @ 1:20...
"If you could take out that pine tree..."
(the only shade in the whole neighborhood... you could have an uninterrupted view of square miles of rooftops)
Masterful thinking.
Using Oceanside as an example is mis-leading to those that have no-clue where Oceanside is.
Absolutely NO way that house is worth $359K with the amount of work it would take to bring it up to date even as owner occupied. Blech...that is one ugly house. No wonder buyers are holding back.
Preserve, Oceanside is simply first, thats all. By the time Pacific Beach, Bird Rock, etc., are pricing at 2002 levels, Oceanside will be at 99/00 levels.
"these mid-range homes are not as attractive to cash flow oriented investors. Jim says the rent would be $2000 per month (maybe as high as $2500 per month all fixed up). The cap rate would probably be around 4.5%; too low for most investors."
In Santa Rosa the
2165 Clover St, 93065
Sold for 525k in 2006, now on sale for 268k
You can find a lot of entries like that up in Ventura. And also the floor of the San Fernando Valley. They usually get snapped up pretty quick though absorption has slowed a bit. You can get a starter home for 50%+ off peak. It's the next step up or 2 that are stubbornly too high (maybe off 15-20%).
I love it when a plan comes together. No stickiness here nosiree.
O'side is just the bleeding edge, the rest will follow.
"Just curious, but are 2002 prices affordable to most buyers?"
MiTurn | 06.30.08 - 11:48 am | #
In my area,not really. Florida had started the run up by then. I can pull hundreds of properties that show insane price jumps starting in 1999/2000. The only propeties selling pretty much are to either dumbasses from overseas or at 1999-2000 pricing. And we are no where even close to the bottom. Oh,I have no idea WHY people are buying from overseas. The stuff they did buy was waaaaaay overpriced. If they plan on flipping they are gonna get burned.
Chris
Oh,I have no idea WHY people are buying from overseas.
Perhaps they have excess dollars that they do not wish to repatriate to their own country (i.e. tax avoidance).
The only problem with Oceanside is its in Oceanside....
As Anonymous said I'll wait for PB at 2002 pricing...
Ha! I just was going to post this as my URL and I found out its back on line: Pacific Beach Housing Bubble Blog
It had some great info for a small localized place....
In my neck of the woods the rents have come down 10-20% in about 4 months time. Of course there are the rentals you see that are out to lunch that have been listed forever. I am betting these cap rate calculations are not going to be valid for very long as more "little landlords" enter the market buying forcosures. Rents are a varible and they are not going up as we see the flood of rentals hitting the markets.
What are lenders doing for appraisals nowadays in markets like Southern Calfornia, Las Vegas etc? Do they consider short sales, foreclosure auctions and the like to be the same as 'willing seller, willing buyer' type sales to establish comparable pricing?
It didn't matter much what an appraisal came in at when prices were rising from a lender's perspective. Any excess evaluation would be covered by appreciation but with prices falling?
Perhaps lenders should be able to make margin calls on borrowers now that the shibboleth that home prices can only go up as been broken.
Agree ministry...especially when arnold increases sales or income taxes. They just increases our water fees and soon to be electric. Cali is deep doo doo for sure. Rents will dive soon just to keep people around
When does Rancho Santa Fe starting feeling it?
....doing my 2nd moving estimate for long time owner occupied homes on the same block in Fullerton, CA .... the area is very nice, family oriented with no visible REO/foreclosures muddying up the tract of homes
the first home Sold in less than 30 days for around $630,000 and is tastefully updated and move in ready it has a spacious bonus room, but no pool and the patio area is delightful to enjoy coffee...front has great curb appeal....
....the second home, ten houses away is a pool home with a below average lawn, crummy plank fencing, an interior painted completely in Navajo White and not much upgrades except a low end granite top kitchen counter...no curb appeal....this home has been on the market for about $610,00 for 247 days.....
both couples are retiring and moving about 350 miles form SoCal....
my last 9 months of moving sales visits leads me to believe that the only owner occupied homes that will sell are the mid-priced, tastefully upgraded homes or the poorly upgraded homes which are priced VERY Aggresively......
Buyers are not willing to finance the retirees move to thier cabin in the pines.........
Oceanside, CA
Median Household Income: 46K
Median Family Income: 52K
8.2% families live below the poverty line
A typical home buyer probably earns a bit more than the above median
A $2000 rent is still beyond those earning the median income
Some vacation demand exists
If you want to see San Diego properties selling or that have sold for huge discounts to previous sale prices, I have collected dozens of them by neighborhood.
San Marcos:
San Marcos Real Estate Collapse: prices down more than 50% from peak; well under 2004 pricing « Greg’s Law & Economics Blog
San Ysidro:
Meltdown in San Ysidro: 47-68% price drops from ‘04-’06 prices « Greg’s Law & Economics Blog
Escondido:
Escondido, CA market in freefall, many many examples of 40%+ price drops « Greg’s Law & Economics Blog
Spring Valley, Imperial Beach, Downtown, and Chula Vista:
San Diego real estate market in freefall; Banks dumping REOs 30-60% below bubble prices « Greg’s Law & Economics Blog
CR,
Perhaps a dumb question, but what is a "cap rate"?
--The cap rate would probably be around 4.5%; too low for most investors.--
$360K for Oceanside is still above 7x median income. Assuming that's a relatively medianish home price, I'd guess it needs to fall another $100K or thereabouts before markets clear.
Oceanside isn't anywhere near the bleeding edge yet.
OT - Short term top in oil still valid.
Again, I ain't gonna pet that dog.
More power to ya if you've got the guts.
Cap Rate = Net Income divided by Purchase Price.
Net income means the rents now, not what you want them to be later.
Higher the Cap Rate, better the investment, all other things being equal to you.
Prices here in Sili Valley are still pretty sticky. Had a friend move back from Taipei... been in Asia for a few years, and he was still convinced that he "better get in before being priced out". I showed him some Case-Shiller plots that happened to be a the top of CR. He's willing to believe he has a couple of years to buy, but figures that if he's willing to stay in a house for 5 years that things will pick back up :^(
Prices for condos seem down a bit more than houses, but still only ~10-15% from a year ago. Jobs are still plentiful, and (my) rent is going up 10%. It's hard to get VC funding now, if you need it and didn't top up before last fall.
I really think it's going to take alt-A hitting this place to do much. Houses aren't selling (based on the folks wagging signs on the weekends), but there aren't that many motivated sellers... yet.
Why worry about cap rates? All you have to do is sell it for more than you pay for it in a couple of years?
Oh wait.
so happy for the first time buyers down there.
It is funny but I have lived in Silicon Valley and for such a progressive tech place, the people there are always behind the curve. It is almost like a super hard headed arrogance of "not im my neighborhood".
Ministry of Truth & SurferNate
Agree ministry...especially when arnold increases sales or income taxes. They just increases our water fees and soon to be electric. Cali is deep doo doo for sure. Rents will dive soon just to keep people around
Interesting perspective on rent. I'm currently renting in the bay area and have actually seen rents and rental demand increase significantly over the last year. We live in a small 3 bedroom and got into it about a year ago at $1950. Equivalent homes are now renting for at least 2200, many around 2500.
I was of the opinion that since lending standards had tightened so much, and so many people were losing their homes that rental demand was increasing.
I don't think rents in the bay area are set to decrease anytime soon. I think there are too many high paying jobs here for people to leave due to increasing rent, and the flood of distressed homeowners turning to rent seems like it would only increase rental demand.
Although I don't know how the economy (recession) might affect this. And I'm also unsure what impact increasing REO sales and declining home values will have on the rental market.
OT (sort of) to the Floridians on the site. How's the pricing holding up at that monstrosity of a retirement community, The Villages @ Spanish Springs, holding up?
$2000 rent is $3076 in earning power...
that's just slightly above national median income for ....3 weeks work
As a former resident of Oceanside, it's a rather bleak place. There's a beach area that's nice enough, if you don't mind the prostitutes in the evening, and the gargantuan view blocking new hotel that the city council approved in a desperate bid for more tax dollars. Horrible schools, lots of gangs, yeah, 369K is a bit high, I'd say.
Bartman writes:
Cap Rate = Net Income divided by Purchase Price.
Does that mean a 4.5% cap rate on a 360K investment home would be about 16K/year, or 1,370/month?
Two offers in, one at full price, another one expected today.
I know, I know - knife-catchers, right?
Jim Klinge we are seeing multiple offers on foreclosures here as well. Mostly "little landlords" buying right now. As I said before the rents are decreasing rapidly and I don't think these calculation for cap rates are holding up. Interest psychology comes out with these "little landlords" in that I find they tweek the numbers or leave out expenses to justify a cap rate. One benifit is these "little landlords" have some cash so they will likely just lose money and not foreclose.
In regards to "silicon valley arrogance"
In summer 2000, due to a job transfer, we sold our very nice custom home in suburban Dallas for $289K and moved to Silicon Valley. We looked at RE prices in and around San Jose and decided there was NO WAY we would buy, and rented instead.
The rental was an overpriced hole, in an out-of-the-way location, and came with a skunk who lived in the crawlspace, which our jerk of a landlord would do nothing to get rid of.
We watched prices rise, and listened to coworkers who claimed CA real estate only went up and by waiting we were missing out on our chance to own. We swallowed hard and bought in 2001 (admittedly, living with a skunk helped to force our decision).
We paid $605K and, sure enough, watched as prices continued to rise. By fall of 2005 we were drunk on the kool-aid, sold at $800K and rolled our "profits" into another home priced at $1.2 mil. It was priced "under market" because it needed upgrading, but was in a great location, and was on a 2/3 acre lot (rare here). We put 20% down, got a 6% fixed-rate mortgage, and made some basic repairs and upgrades. We were confident that we had made a smart purchase, and sure enough the value continued to rise, to approx $1.35mil. Then we watched it drop. Zillow says $1.05Mil. The market says mid-$900K. Values are still dropping. Even with a 20% down payment, we are under water on our mortgage. Between down payment, costs, and upgrades/repairs, we are out well over $300K. SO FAR.
I expect prices in this area to drop to AT LEAST 2003 values. They are pretty close to that now.
Needless to say, I've laid off the kool-aid, and am now stone-cold sober. My spouse is another story. The "Valley" is "special" he says. Housing will "recover". He is convinced that within a couple of years, prices will be right back where they were. I am "too negative".
We can afford the mortgage, but we're pretty much screwed.
I have some serious snark here.
The fit and finish is just awful, but typical of what I call "California Contemporary." It reminds me of a mobile home.
What one is buying here is a poorly maintained house with used wall-to-wall carpet (yuck!), home center fixtures and cheap doors (argh!).
A 60 x 100 lot you'd have to scale with mountain climbing equipment?
Sure, Conjure could use the tree as a scratching post but, beyond that, what's it got to offer?
Sorry, but I wouldn't pay 159 for the thing. In fact, I'm comparing it to a 2500 sq. foot house, well-built, hardwood throughout, almost new, on a beautiful 5 acre wooded lot for $100,000 less.
This is what happens when people have to live near their work.
Enjoy California, Suckers.
$360k for that? I consider that home to be a complete fixer - bad roof, ugly & dated fixtures, exterior in roof shape, etc. It's a complete redo at this point to get it into what I would consider to be sellable condition.
It seems to me that people have become used to seeing insanely high prices that when a home is simply "way too high" it doesn't seem like a bad price to them. A buyer who jumps at this home will eventually learn they made an error.
A home like that need to go for 1995 prices to make it worthwhile for me.
So "Ministry" and others - what do you put into your expense column on a cap rate? No judgement just trying to learn.
Three terms
(1) Housing Depression
(2) Energy Super-shock
(3) Credit Collapse
Tin-foil hatters unite and laugh your keisters off in your well-supplied victory garden with open carry sidearm just feet from your concrete bunker, ammo boxes, water & food storage.
Then again I might be overreacting.
A question for the posters familiar with San Diego.
What are the better neighborhoods and geographical regions in San Diego?
My wife loves San Diego, I am not too enthusiastic, but do to health concerns(wife) we are contemplating moving west.
Any other insiders info on the area would be greatly appreciated. Thanks in advance.
Lived here most all my life.
Carlsbad is nice, coastal Oceanside is nice, Encinitas is nicer. La Jolla and Point Loma and Del Mar are all extremely nice. Bird Rock, La Jolla Shores are both very nice.
Ministry of Truth writes:
...As I said before the rents are decreasing rapidly...
Ministry, I think you mentioned you live in silicon valley? I'm curious where you are getting your rental data?
Not trying to discredit you, just curious where you are seeing this. Based on my rudimentary observation of what the standard 3/2 detached home was going for a year ago, and what they are listed for now on craigslist for S.J. area, I'm seeing at least a 10-20% increase in rents.
the flood of distressed homeowners turning to rent seems like it would only increase rental demand.
And what's going to happen to their old houses? Plus all the houses that were built but never occupied?
Right.
Jim, thanks for the update.
Best Wishes
I think we'll see these 2002 prices also: DJIA at 8000, down 3380 pts., minus 30%, SP500 at 900, down 383, minus 30%. Or maybe down 50% like I went thru in '73-'74.
@ Mercutio.Mont
are you saying that the corridor north(of SD) by the ocean are the best areas to live?
Also what are some of the drawbacks to SD?
Thanks for the reply.
David,
I'll add this:
Carlsbad to Pacific Beach is the preferred coastal market. Better schools (though not perfect) but highest prices. Not many habitable houses under $500,000, at least not yet.
If you want to take a flyer on Oceanside or Vista and send your kids to private school, you'll get a lot more for your money, but you really have to pick your spots.
If you go inland you get a better value but trade for hotter temps in summer. Poway schools have the best reputation.
I doubt that there is a high school in Caifornia that doesn't have its share of drug-dealing and other problems, so expect that wherever you go.
I have been looking for a rental house in Silicon Valley for a week. I'm finding that rents are much higher than what I saw 5 yrs ago. Maybe, 35 to 50% higher. But, my benchmark point is the post dot-com bubble, and things have changed since then.
There are many renters out there; people who cannot afford to buy and people who are waiting for the market to cool down.
I suspect, during last several years, the number of rental units have declined as their lots got sold and converted to MacMansions. So, the market is really tight. In all the rental open house events, I saw several families/couples coming to see the same place.
In Craigslist, I also see some rental ads for MacMansions whose rents run between $8500 to $13000 a month(that must be the mortgage payment these flippers are paying).
There is a huge gap between the rental markets and the sales market in Silicon Valley. It will take a long time before the sales market downturn starts impacting the rental market.
good cap rate overview:
Cap Rate Formula | What's Your Property Worth?
The expenses are include in income . . .
We live in Silicon Valley as well. We just moved from a rental in Santa Clara to a rental in Sunnyvale. Rents are up. My take is that the market is in a paralyzed state and paralyzed units don't rent. They sit empty. There are more housing units per resident than ever before, and check out a foreclosure heat map on Hotpads.com. Used to be just Morgan Hill red. Now the wave has taken everything up to Mountain View. There is no reason the wave won't keep moving. There is such a price "pressure difference" with the central valley and even the East Bay that people will flow slightly out, and prices will drop as the weaker hands fold and all the new capacity comes out (e.g. big development at 85&Union, big development at 101&San Antonio). The non-tech and non-high-wage folk can move from Alum Rock to Hayward as they get foreclosed on, as well as move back in with their folks (just bought bookshelves off craigslist from folks doing this). There is waaaaay more elasticity than people imagine, but it hasn't begun to stretch the rentals price down yet. But really, look at hotpads.com and see how badly places like Alum Rock are doing, and that is only 10 minutes from Sunnyvale.
When I was 12, I asked my very poor grandmother why some people, the landlords, owned so many houses in our beat up part of the north east.
She told me the story of the stock market crash of '29, the job losses, the foreclosures, the bread lines. My grandfather had died of pneumonia because they had no money for the hospital. She told me what it was like to live in an attic with no heat, during sub zero weather, trying to keep her little children warm.
I said "Grandma, where did the landlords get the money to buy all the foreclosed houses?". She said "They had cash. If you learn anything from me, it's to always have cash, even if it means going hungry."
And who were these landlords with cash? The immigrant Poles, Italians and Germans. These people eschewed banks and rejected the relatively luxurious consumer goods oriented life style Americans lived between the Edwardian era and the end of the 1920's.
At 2008's lender REO auctions, the would-be cash buyers I am seeing are (1) immigrants and (2) grand children of the ethnic landlords who bought rental houses during the 1930's.
Grandma, you've been gone a long time but I'm still listening to you.